Monday, October 3, 2016

As Martin Sandbu pointed out last week, Brexit has
to mean less free trade, despite what Liam Fox says, because less access to the
single market means greater barriers to trade (whether tariffs or the more relevant 'non-tariff barriers to trade': regulations, rules of origin, and so on). Any
potential gains (new free trade agreements) are in the future, and moreover not
that convincing in any case (because of Britain's weak bargaining position, the loss of access to trade
agreements through EU, and the time and costs involved in reaching agreements).

Moreover, the Brexit coalition (a bare majority of voters, though a tiny minority in parliament) is deeply divided on what follows Brexit.

-On the one hand, free traders
like (supposedly) Fox and more coherently Daniel Hannan see the EU
as a source of restrictions on market freedom, and therefore argue that leaving will reduce regulation and improve economic performance. (This is
entirely implausible, since most EU regulation is about reducing barriers to
market access, and the UK already has low regulation by international
standards). To the extent that labour market freedom is part of this package,
it would not imply any reduction in immigration.

-On the other, the UKIP/Tory
nationalist strand of the coalition is vehemently opposed to any restrictions
on UK control of borders. This implies restrictions on the ‘labour’ part of
market freedom (heavier regulation to achieve fewer immigrants) and
control/regulation over goods and services entering the UK (leaving EU customs
union). This implies lower immigration, but also less trade, and potentially
the death of the UK’s recent model of high openness to FDI and speculative
capital.

The incoherence of the Brexit position has
so far been resolved by a combination of wishful thinking and bullshit. The
wishful thinking part revolves around the notion that the EU needs the UK so
badly that it will let us keep all of the privileges of EU membership without
any of the obligations. The bullshit part involves simply refusing to
understand the incoherences of the Brexit position (in particular, the idea
that you can have free trade whilst voluntarily exiting the world’s largest,
and our nearest, free trade bloc).

What both of these positions have in common
is their solipsism. The obvious inconsistencies in Brexiter thinking are resolved
by assuming an Anglo-centric view of the world in which others will willingly
submit to our demands, however unreasonable, or in which simply by virtue of
being who we are, the contradictions of Brexit just don’t actually apply.

Examples of the former are: Germany sells
us cars, so they will not want us to impose tariffs (we sell more cars to the EU than Germany sells to us; Germany has not hesitated to undermine other export
markets, eg the Eurozone periphery, when it suited them; tariffs are actually required under
international law unless the EU as a collective decides to offer a
comprehensive free trade agreement within two years).

Examples of the latter are: Britain can now
freely export all around the world, free of EU shackles (we have no obvious
competitive advantage to draw on – we are a high wage, low skill country a long way from
non-EU markets); France will still buy our jam, because it’s really good (so is
Bonne Maman); we had free trade without immigration in the 19th
century, why not now (we ran an Empire).

This solipsism is otherwise known as
nationalism. In a complex world where we face huge challenges (paying off our
debts when we don’t actually produce many attractive goods and services, coping
with the turbulence and social disruption brought by our heavy dependence on
financial inflows, the skill shortages and demographic imbalances that act as a
pull factor for migration), it is comforting to retreat into a nationalist
vision of the world in which bad things are caused by our enemies, and if only
we could shut them out, things would be better.

The UK is not alone in this: Trump in the
US and the various right-wing demogogues prospering in Europe at the moment all
draw on the same ideas and sentiments. But the UK has an added toxic
ingredient: our imperial past. The US, as a real existing Empire (albeit in decline) can actually elect
a Trump and this would possibly represent a greater danger to others than to
the US itself. The UK has a collective memory of being in this situation, of
being able to doing whatever it wants, backstopped by military might. But it
is no longer the case. India will buy our exports if we buy its
exports, not because we tell them to do as they are told.

The option of closing our borders whilst
forcing others to open theirs to us is no longer on the table for the UK. It is
imperative that the younger generations who have most to lose from this harsh
reality wake up to the fact, and deny the largely older Brexit voters the pleasure
of torching the fields on their way out just to remember what it was like to be
young.